Estate planning is not just for retirees. Summer is a busy time in the office for completing wills of young parents. Planning a summer vacation forces parents to think about who would look after their children if they both perished in an airplane or car accident.
The first step of the will is to name a Guardian avoiding the need for the Court to determine who should be responsible for their children. In addition to naming a guardian, the parents usually select a Trustee to manage the money (usually life insurance proceeds) they have set aside to raise their children. The question is always whether that person should be the same person as the Guardian. The answer is always “It depends”. A Trustee who is also a Guardian is in a position to watch over all aspects of the child’s development. An independent Trustee provides a second opinion on the child’s “best interest” and splits the workload of raising the child.
Preparing for the common disaster is often the extent of planning that most young parents accomplish and it is the most important planning they can do. However, statistics tell us that it is much more likely for just one of the parents to pass away before the children are independent. A simple will that leaves everything to the surviving spouse may not be the best thing for the children.
My recommendation is to establish a trust for the benefit of the children at the death of either parent. The trust can reduce estate taxes, provide a means to manage the money set aside for the children, provide creditor protection against the surviving parent’s creditors, and prevent the children’s money from being mixed into the new family’s funds if the surviving parent remarries.
A children’s trust can be setup in a will or by an Irrevocable Life Insurance Trust. The Irrevocable Life Insurance Trust is going to become a very popular tax planning device with the Federal Estate Tax being reinstated in 2011. Estate planning is not just for retirees. Think about meeting with an experienced Estate Planning Attorney before your summer vacation or your next business trip.